Have you heard about the tax free childcare scheme that will be coming into force in March 2018? It’s a new Government-backed initiative that could benefit some families to the tune of up to £2,000 per child per year – or £4,000 for children with disabilities. Want to know more? Let’s take a look at the new scheme and how it will work.
What will families be entitled to?
The new tax free childcare scheme will give families back 20% of the cost of childcare, effectively removing the tax paid on childcare fees. For each child in the family, parents will pay 80p towards childcare and the government will top it up with 20p – so if your childcare costs are £10,000 per year, you’ll only pay £8,000. The scheme has a cap, so any costs over £10,000 per child won’t be taken into account by the government unless your child is disabled.
Am I eligible and how do I apply?
There are some constraints on who can apply for the new tax free childcare scheme.
- Working parents. To get the tax benefits, both parents must be working and earning more than an average of £120 per week. There’s also an upper limit of £100,000 per year for either parent – if one parent earns more than this, then the family is not entitled to tax free childcare. Self-employed parents are covered by the scheme, and can average out their earnings to a three-monthly amount.
- There are some exceptions to the rule about both parents working. If one or both of you are unable to work and are receiving benefits such as incapacity benefit or carer’s allowance, you are still eligible for the scheme.
- Age limit. Only children aged up to 11 are eligible for the tax break (this extends up to 15 years old if they have a disability).
- Registered provider. In order for your family to benefit from the new scheme, your childcare provider must be registered with both a regulator such as Ofsted, and the scheme itself. You’ll be pleased to learn that Toad Hall Nurseries is a registered provider! Read more about childcare funding at Toad Hall.
Replacing childcare vouchers
The new tax free childcare scheme is being introduced to replace the old childcare voucher scheme, which is currently offered by some, but not all, employers. If you don’t currently receive childcare vouchers but would be better off with them than under the new scheme, you can still apply until October (exact date yet to be set).
If you do already receive childcare vouchers, you can continue to benefit from these for as long as you work for your current employer, but if you’d prefer to switch to the new scheme you can do this, too. To work out what’s right for you, you’ll need to be aware of the differences between the two schemes; some families currently benefiting from childcare vouchers may no longer be entitled to a tax break under the new scheme, such as those with children aged 12-15.
Find out more
The ins and outs of the tax free childcare scheme can be complicated, so it’s worth doing your research. Check out the Tax Free Childcare page on the official Gov. uk website, which will explain in more detail who’s eligible and how to apply. The Money Saving Expert information on tax free childcare is also helpful for parents working out whether to continue with vouchers or switch to the new system.